We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like J&J Snack Foods Corp. (NASDAQ:JJSF).
J&J Snack Foods Corp. (NASDAQ:JJSF) shareholders have witnessed an increase in support from the world's most elite money managers recently. Our calculations also showed that JJSF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to check out the latest hedge fund action regarding J&J Snack Foods Corp. (NASDAQ:JJSF).
What have hedge funds been doing with J&J Snack Foods Corp. (NASDAQ:JJSF)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 31% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in JJSF over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of J&J Snack Foods Corp. (NASDAQ:JJSF), with a stake worth $67.9 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $15.6 million. GAMCO Investors, Citadel Investment Group, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to J&J Snack Foods Corp. (NASDAQ:JJSF), around 0.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to JJSF.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most valuable position in J&J Snack Foods Corp. (NASDAQ:JJSF). Laurion Capital Management had $0.8 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $0.8 million investment in the stock during the quarter. The other funds with brand new JJSF positions are Peter Algert and Kevin Coldiron's Algert Coldiron Investors, John Overdeck and David Siegel's Two Sigma Advisors, and Donald Sussman's Paloma Partners.
Let's now review hedge fund activity in other stocks similar to J&J Snack Foods Corp. (NASDAQ:JJSF). These stocks are Umpqua Holdings Corp (NASDAQ:UMPQ), Valley National Bancorp (NASDAQ:VLY), Blueprint Medicines Corporation (NASDAQ:BPMC), and GSX Techedu Inc. (NYSE:GSX). All of these stocks' market caps are closest to JJSF's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UMPQ,20,140686,0 VLY,15,13438,4 BPMC,26,707543,-1 GSX,3,6778,1 Average,16,217111,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $132 million in JJSF's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 3 bullish hedge fund positions. J&J Snack Foods Corp. (NASDAQ:JJSF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately JJSF wasn't nearly as popular as these 20 stocks and hedge funds that were betting on JJSF were disappointed as the stock returned -3.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.